Exhibit 99.1
1025 Eldorado Boulevard
Broomfield, Colorado 80021
www.Level3.com
NEWS RELEASE
Level 3 contacts:
Media: Josh Howell Investors: Robin Grey
720-888-2517 720-888-2518
Arthur Hodges
720-888-6184
Level 3 Signs Agreement to Raise $500 Million in New Capital
Longleaf Partners Funds, Berkshire Hathaway and Legg Mason
To Jointly Invest in Level 3
BROOMFIELD, Colo., July 8, 2002 -- Level 3 Communications, Inc. (Nasdaq:LVLT),
announced today that it has signed an agreement to sell $500 million aggregate
principal amount of its 9% junior convertible subordinated notes due 2012 to
three institutions: Longleaf Partners Funds, Berkshire Hathaway Inc., and Legg
Mason, Inc. The transaction is expected to close today. Level 3 intends to use
the net proceeds for general corporate purposes, including potential
acquisitions relating to industry consolidation opportunities, capital
expenditures and working capital.
"It is widely recognized that the telecommunications industry is going through a
period of unprecedented turmoil," said James Q. Crowe, Level 3's chief executive
officer. "At the same time, however, the ongoing shakeout is creating
extraordinary opportunities, as telecommunications companies, their network
assets and customer bases become
available. We are fortunate to have both network management expertise and
financial dry powder, which will allow us to continue pursuing opportunities
that create value for our stockholders."
Longleaf Partners Funds (Partners Fund and Small-Cap Fund) is purchasing $300
million of the convertible notes; Berkshire Hathaway is purchasing $100 million;
and Legg Mason is purchasing $100 million. The notes, which mature in 10 years,
pay 9% cash interest. The notes are convertible, at the option of the holders,
into common stock at any time at a conversion price of $3.41, subject to certain
adjustments. The notes are convertible at the company's option into convertible
preferred stock under certain conditions and circumstances. The convertible
notes rank junior to substantially all of the company's existing indebtedness.
In addition, all three institutions have indicated that they would consider
possible additional investment in the company in the future, although neither
the company nor the institutions have an obligation with respect to any future
investment. Pro forma for the $500 million new investment, the company had a
cash and marketable securities balance of approximately $1.5 billion at June 30,
2002.
Walter Scott Jr., chairman of Level 3, said: "We are particularly pleased that
Level 3 was able to secure additional investment of this magnitude given the
constraints of today's capital markets. Perhaps more important is the reputation
and stature of the investors who have chosen to partner with us. We look forward
to working with Longleaf Partners Funds, Berkshire Hathaway and Legg Mason as we
pursue the opportunities that lie before us."
O. Mason Hawkins, chairman and CEO of Southeastern Asset Management, adviser to
Longleaf Partners Funds, said, "We invested in Level 3 to take advantage of
consolidation opportunities in the telecommunications arena. We believe these
opportunities are substantial. Level 3 is uniquely and competitively positioned,
and its management team, led by Jim Crowe, is most able."
Warren Buffett, chairman of Berkshire Hathaway, issued the following comment on
his company's investment in Level 3: "Liquid resources and strong financial
backing are
scarce and valuable assets in today's telecommunications world. Level 3 has
both. Coupled with the management of Walter Scott and Jim Crowe, in whom I have
great confidence, Level 3 is well equipped to seize important opportunities that
are likely to develop in the communications industry."
Bill Miller, chief executive of Legg Mason Funds Management, noted that demand
for communications services continues to grow at the same time that the number
of service providers is shrinking. "Spending on communications services is
non-discretionary," Miller said. "We believe more strongly than ever that Level
3 is emerging as one of the ultimate leaders, survivors and consolidators in the
industry."
Level 3 will hold a conference call to discuss today's announcement on Monday,
July 8, at 4:30 p.m. eastern time. Investors and analysts in the United States
who want to join the call can dial 888-423-3276, 612-332-1020, or 612-332-0630.
International callers should dial 612-288-0337. A live broadcast of the call can
also be heard on Level 3's web site at www.level3.com.
About Level 3 Communications
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Level 3 (Nasdaq:LVLT) is an international communications and information
services company offering a wide selection of services including IP services,
broadband transport, colocation services and the industry's first Softswitch
based services. Its Web address is www.Level3.com.
The company offers information services through its wholly-owned subsidiaries,
(i)Structure, Corporate Software and Software Spectrum. (i)Structure is an
Application Infrastructure Provider that provides managed IT infrastructure
services and enables businesses to outsource IT operations. Its Web address is
www.i-structure.com. Corporate Software and Software Spectrum help Fortune 500
companies acquire, implement, and manage software. Their Web addresses are
www.corporatesoftware.com and www.softwarespectrum.com.
Forward Looking Statement
Some of the statements made by Level 3 in this press release are forward-looking
in nature. Actual results may differ materially from those projected in
forward-looking statements. Level 3 believes that its primary risk factors
include, but are not limited to: changes in the overall economy relating to,
among other things, the September 11 attacks and subsequent events, substantial
capital requirements; development of effective internal processes and systems;
the ability to attract and retain high quality employees; technology; the number
and size of competitors in its markets; law and regulatory policy; and the mix
of products and services offered in the company's target markets. Additional
information concerning these and other important factors can be found within
Level 3's filings with the Securities and Exchange Commission. Statements in
this release should be evaluated in light of these important factors.